Why Asset Allocation                                     

Age old saying is that “Don`t put all your eggs into one basket.”

The same rule in technical terms is known as “Asset Allocation.”

Generally, we prefer to invest as our forefathers or our friends did, as relatives suggest or where market trend moves or where everyone gets attracted.

·      Which stock/ funds/ land / physical gold / ETF / Fixed deposit isn`t important, but how much percentage allocation goes into that asset class is important.

·      Likewise many people prefer only real estate and insurance policies as an investment, but when in actual need of  money they are unable to encash. So they are asset wise rich and liquidity wise poor.

·      Businessmen invest all their wealth in their business, confident over the control of their business, they miss out to do provision for second source of income. In the past we have seen many businesses wipe out or struggle to sustain due to change in the economy, technology and globalization. (Eg. Due to mall concept small retail shops suffers)

·      Many hold large amount of cash in saving accounts, they are working hard for money but miss out to make money work for them. And inflation is like Bhasmasur, eats away our purchasing power.

·      Middle class loaded with Gold and Fixed deposits, generally entered in the last leg of that asset class, when that asset was highlighted in media and news papers. (Eg. Many people started purchasing Gold when 25000, not at 5000)

·      Greed makes most people  buy that trendy asset class at any price and fear keeps them away from purchasing good assets at a fair and lower price.

·      Young generation are in too much hurry to buy a house thereby paying huge EMI’s thinking they are creating asset but in reality they are creating liabilities and committing their future income to banks. They miss out the early wealth creation benefits.

·      Last, there are the retired investors, who refuse to look beyond fixed income products and deposits and focus only on safety, but miss out on the longitivity risk and inflation risk. They must allocate small part of their wealth in inflation beating assets.

So, from this financial year -     Start planning your finance. Financial planning is life planning.     List down all the responsibilities and our dreams.     Start prioritising them as short term, medium term and long term goals.     Decide goal wise asset allocation with the help of your financial advisor and don`t stop here.     Sit with your financial advisor atleast once yearly for rebalancing of your investment.

Wishing you a wealthy and peaceful financial year ahead